Biz community commends 2017 FDI inflow

The business community hailed the achievement with regard to the Foreign Direct Investment (FDI) flow to the country during 2017 as a commendable feat at a time when global FDIs had dropped by around 16 percent. However, it also noted that the country cannot remain complacent and be carried away by the achievement but rather needs to work on improving its ease of doing business rankings, focus on increasing non debt creating foreign inflows and gaining from its strategic position in the region.

Candor Group of Companies Director/ CEO Ravi Abeysuriya said inflows of FDIs to companies registered in Sri Lanka under the BOI including loans, is estimated to be US dollars 1.63 billion in 2017 as compared to US dollars 801 million in 2016, reflecting a year-on-year increase of 103 per cent. This is the highest ever FDI received by Sri Lanka surpassing the US$ 1.5 billion in 2014, a key milestone for Sri Lanka and will be a turning point in FDI inflows.

This is a remarkable achievement, when global FDIs have reduced by 16 per cent in 2017, to an estimated 1.52 trillion U.S. dollars, from 1.81 trillion dollars in 2016. However, FDIs to developing economies have remained stable at an estimated US $ 653 billion, 2 percent more than the previous year, according to the ‘Investment Trends Monitor’ released by the United Nations Conference on Trade and Development (UNCTAD). The increase in FDI to Sri Lanka in 2017 can be largely attributed to the commencement of the Hambantota industrial zone and the continuation of the Colombo Port City project.

These two projects together with other planned infrastructure projects, is expected to bring significant FDI flows from this year onwards to Sri Lanka in the tune of US $ 2 to 3 billion.

The current government policy is to attract more on non-debt creating financial flows to the country to generate increasing growth, employment and incomes.

Sri Lanka need to leverage its strengths such as strategic geographical location, Free Trade Agreements, excellent international relations, including w gulatory environment along with political stability, security, and macroeconomic conditions are key factors for multinational companies making investment decisions in developing countries.

FDIs usually have a multiplier effect in economies with good governance, well-functioning institutions, and transparent and predictable legal environments. Regulatory simplification, removing barriers to investment entry and addressing infrastructure constraints rank among the important confidence building signals for investors to respond with more FDI to a country.

The key challenge will be effective implementation. It is important to build a national consensus and involve all stakeholders. Sri Lanka was second to Japan in Asia on most indicators at the time of independence. Today, it has slipped behind several other countries. Many opportunities have been lost during the last 68 years.

The current historical conjuncture holds considerable promise. The opportunities need to be seized, which is the challenge for all Sri Lankans.

University of Colombo Professor of Economics Sirimal Abeyratne said is indeed a good news that Sri Lanka has been improving as an attractive destination for FDI inflows in Asia.

According to UNCTAD, world FDI inflows were amounted to US $1.52 trillion in 2017 so that Sri Lanka has been able to attract $1.63 billion which is about 0.1% of the world total.

Developing Asia that attracted $459 billion FDI flows in 2017 continued to remain the most attractive destination for FDI inflows. While US, China and Hong Kong were the top three countries receiving FDI last year, India with $45 billion FDI inflows reported to be in the 10th position.

JB Securities (Pvt) Ltd Managing Director Murtaza Jafferjee said every US Dollar counts, so one must be appreciative of what has been achieved. Ideally one would like to have a larger share towards export oriented efficiency seeking FDI that would have a high employment content.

“We also need to further diversify our export basket which requires a lot of hard work,” he said. Foreign Direct Investment (FDI) into Sri Lanka grew to over US$1.63bn in 2017, doubling from the US$802m achieved the previous year. The Board of Investment (BOI), the agency tasked with promoting and facilitating FDI, reported that US$1.63bn has been achieved in 2017, which is the highest ever surpassing the US$ 1.61 in 2014, with solid growth across key sectors. The strong growth is a direct consequence of the Government’s reorientation of economic policy towards investment and export driven growth, rather than debt-funded public infrastructure spending.

Among the highest growth sectors were export-oriented Manufacturing (+27%) and Services which includes Tourism and IT (+50%) and Infrastructure (+190%). The highest FDI came from China, followed by Hong Kong, India and Singapore.

The government aims to achieve US$ 5 billion in FDI by 2020. It envisages to achieve US$2.5bn of FDI in this year following the implementation of the new Inland Revenue Act and the liberalization of the foreign exchange regime to improve the investment climate in the country. Meanwhile, the BOI has commenced work on developing several new export promotion zones including Milleniya, Bingiriya, Weligama and Mawathagama.